A strong dollar and the collapse in energy prices have derailed manufacturing, but the same forces have helped give a tailwind to the services side of the USA economy.
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The Institute for Supply Management’s nonmanufacturing purchasing-managers index rose to 59.1 in October from 56.9 in September.
A retail trade respondent said that overall business and volume have been very consistent and strong over the past month, and a professional, scientific, and technical services respondent observed that the economic outlook appears consistent but clients are suddenly very conservative with discretionary spending. The October NMI is 1.6 percent higher than the 12-month average of 57.5. Wednesday’s data diverge sharply from ISM’s manufacturing survey, released on Monday, which showed that growth stagnated in October. Employment inched up 0.9 percent to 59.2, showing growth at a faster rate for the 20th month in a row.
New orders rose to a reading of 62, up from 56.7 in September. On the upside, the biggest increases in the report were in New Orders and Business Activity. Readings above 50 indicate slower deliveries. Its services survey covers businesses that employ 90 percent of workers, including construction firms and financial services.
Sales are surging as job growth, available credit and low gas prices encourage shoppers to replace aging models, especially with sport utility vehicles.
Still, many economists expect the US economy to strengthen in the end of the year.
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The Federal Open Market Committee also added a reference to the possibility of increasing the rate “at its next meeting” in December, based on “realized and expected” progress in reaching goals.
